Going from analogue to digital.

Posted On 16th February 2018

Helping the world’s largest organizations in digital transformation processes McKinsey & Company (2018), arguably the world’s leading management consulting firm, have defined a system of six shifts for digital adoption which they use in their work to help their clients to digitize their most important customer experiences “at scale, at speed, in a consistent way and with consistent resources to produce consistent results.” This article presents McKinsey system (Desmet, Markovitch and Paquette, 2015) and discusses how it benefits, not only large and mature organizations with significant resources (staff and money), but also small organizations and even boot-strapped start-ups.

As noted by Windpassinger (2017), Narasimhan and Chundury (2018) organizations of all sizes and in almost all lines of business are digitizing their core organizational structures to the web. Traditional marketing channels (print, radio and TV etc.) also are losing ground to “new” advertising models and channels including AdWords, Social Media and Augmented Reality (Holiday, 2015).

While launching a website, an e-commerce platform or a mobile app has become cheap and easy by the many marketplaces offering web- and app templates such as ThemeForest (2018) and WooCommerce (2018); the problem facing many organizations digitizing their processes is a siloed IT-structure with unconnected digital assets (corporate websites, CRM-systems and/or analytics platforms etc.), resulting in error-prone, costly and complex management processes and thereby also less capacity to successfully compete in today’s fast-moving markets (Schwab, 2017).

To cope with many of the problems that comes with a digital adoption process; management consultant firm McKinsey has developed a system to help organizations implement, scale and accelerate digital transformation (Desmet, Markovitch and Paquette, 2015). The system is built around the notion that digital transformational processes should start with identifying horizontal business-process management layers which then should form the basis for a digital backbone/administration platform connecting core digital assets (internal and external) into one coherent and connected IT-infrastructure.

In the following sections, McKinsey system for digital transformation is presented together with a discussion about how each of the systems six shifts can be adapted to small organizations with limited resources.

McKINSEY’S SIX SHIFTS FOR DIGITAL TRANSFORMATION

1. Start with your story

McKinsey first shift emphasizes that a digital transformation process needs to be grounded in an “Enterprise customer Experience Story” which should guide the transformation with practical guidelines and which also should define what customers should experience across all journeys they may undertake with the organization. As the key to succeeding in any transformational process always is a strategy which is clearly communicated, rationalized and agreed upon by the people it depends on, this first shift of McKinsey’s system applies to any organization going through a transformational change; no matter size, line of business or if the organization a commercial business or an NGO.

2. Sequence your tech transformation

In the second shift, McKinsey emphasizes the importance of connecting all parts of an IT-architecture (websites, apps, analytics, CRM etc.) into a coherent and linked system enabling more control, simpler processes and reduced costs. Common methods for sequencing digital assets within an organization include building, for example, websites, apps and e-commerce platforms using an API-platform such as Apigee, (2018), 3scale (2018) or Appian (2018) which allows all digital assets of an IT-structure (websites, blogs, CRMs, apps, marketing automation platforms, analytics etc.) to be administrated in one coherent and connected back-end system.

Many small and medium-sized organizations embarking a digital transformation journey might not be aware of APIs and BPM-platforms or might be of the notion that such methodologies only adhere to large organizations, which in my experience often is the result of developers working within or as external partners (agencies/freelancers) connected to the organization has not cared to keep their skill-set up to date with current development methodologies and to a great extent rely their work on commercial web templates, and consequently are reluctant to any change outside their personal skill-set.

Considering the significant winnings that come with BPM-platforms and APIs, all organizations, though, should consider using an API/BPM-platform as a foundation for their IT-structure. The fact that most of these platforms also are easy to learn in a few days in addition to offering “start” packages for a cost less than a monthly gym membership; there is no reason why not even a small five-person start-up should consider using them.

3. Turn, shift, accelerate, and repeat

While the Lean methodology of project management has its roots in Toyota as far back as 1948; Goldratt’s 1984 best-seller ‘The Goal’ made lean thinking known to a wider audience; a book which most certainly also inspired Jeff Sutherland, Ken Schwaber, Jim Highsmith, Alistar Cockburn and Bob Martig to publish the Agile Manifesto (2001) that form the basis for much of today’s principal ideas how to run projects and organizations successfully.

It was, however, Eric Ries 2011 book ‘The Lean Startup’ that really catapulted the Lean methodology to become widely accepted in which he also launched the idea of MVPs (minimal viable products); a strategy built around the notion that companies instead of aiming for creating perfect products which might take years to develop before ready to be launched and consequently in today’s fast moving markets even might be obsolete when finally launched; instead should focus on launching fast and often, listen to feedback by real customers and quickly adapting the product or the service to this feedback and then quickly launch again in a perpetuating circle. This, as shown by Ries and the thousands of organizations who have adopted his methodology, can be achieved by identifying and focusing on developing only core features that matter the most for a preponderance of customers and de-prioritize non-important features.

McKinsey’s third shift state that organizations should adopt Agile workflows and the ideas presented in ‘The Lean Startup,’ and as Reis book and the thousands of start-ups adopting his methodology clearly show, these methodologies are relevant for multinational corporations as well as small start-ups.

4. Build talent—and your digital “factory.”

McKinsey’s fourth shift is about adapting all parts of an organization so it can move quickly, innovate and adapt to an environment of continuous changing requirements. For large organizations, this might be achieved by, for example, building a core team of project managers, developers and designers which are proficient in “day-to-day” work and to build a network of freelancers and agencies to work within areas demanding niche competence. McKinsey also borrows the idea of “Work Cells” from the Six Sigma model of supply management (Pyzdek and Keller, 2015; Liker, 2013; Nicholas, 2011) which in McKinsey’s system is translated to groups of internal co-workers from different departments (sales, credit analysis, development etc.) whom work together to solve a specific problem or need after which the work cell then dissolve.

Building an in-house production strategy for small organizations, as also illustrated well by Ducker in his 2014 bestseller ‘Virtual Freedom,’ rarely make sense neither from an economic- or production efficiency stand-point, and for small organizations, thereby, working with external co-workers (freelancers and agencies) might be the only viable alternative which also is especially true if the organization has adopted Agile workflows. Making sure that the organizations shared Rolodex always is updated with talent, thereby, always should constitute a key priority by a leadership no matter organizational size.

5. Creative a game plan

The fifth shift of McKinsey’s model borrows the idea of ‘Agile project charters’ (Agile Alliance, 2018), and emphasizes that organizations should make a game-plan guiding project work based on probing questions instead of explicit compliance steps and which constantly should evolve to reflect current requirements and situational needs.

As the key to succeeding with non-fixed people management structures regardless organizational size always is to make sure that everyone in a team understands what is expected of them, what the goals of the project are, quality requirements, operational guidelines, working processes and governance steps; a project charter or game plan is the key to success in any project and/or transformational process.

6. Track it all the way

McKinsey’s sixth shift emphasizes the importance of defining long-term over short-term organizational and individual OKRs (objectives and key results) in transitional processes to make sure that innovation, collaboration and long-term growth is the prime focus and not short-term revenue. To make sure that leaders know where to prioritize investments, a rapid reporting structure also should be implemented and McKinsey recommends that digital dashboards to be developed which in real-time report on primary KPIs, which also is a key function of all BMP-platforms discussed section two: Sequence your tech transformation.

While a small organization might not see the need of live-reporting; all organizations should have clearly defined OKRs related to all their investments and also supporting KPIs tracking each OKR communicated in a format and at a frequency agreed upon by all key constituents of the organization to make sure that investments deliver according to plan and also to work as early warning signals if a strategy fails to deliver before it is too late to change strategy.

Conclusion

In a typical “McKinseyeskt Operandi;” the companies six shifts for digital transformation presented in this article is an amalgam of established methodologies and models which the company ruthlessly have repackaged under their own brand without referencing the sources.

While the fact that McKinsey consistently fail to reference sources of the theories forming the basis for their work is both immoral and indefensible, especially for a company of this size, they should have credit for having established a solid system for digital adoption and organizational growth based on leading business strategies into a logic system; which as shown in this article, also can be adapted to fit organizations of almost any size.

What should be noted, though, is that McKinsey and much of the leading business literature which McKinsey steal their ideas from fail to consider, though; is the fact that Agile workflows, digitization and outsourcing competence are not a ‘one-size-fits-all solution’. While for many of the authors topping Amazon’s best-seller list of business management literature of which a large majority also have strong roots in tech and from companies with growth as a fundamental guiding principle it might be incomprehensible that an organization might be perfectly happy with a current status quo of returns, “analogue” processes and siloed IT-systems with projects managed through a simple task list on a whiteboard. Even more surprising for these technocrats might be that many “analogue” organizations do extremely well, maybe best embodied in 360.000 employee Berkshire Hathaway; a company which for the last fifty years have managed to outperform most Wall street investment firms and which is led by Warren Buffet, one of the world’s richest men who runs his 360.000 employee company without using email and whose desk lacks a computer (The Economic Times, 2017).

Fifteen years ago when I embarked my journey as an Agile practitioner after reading the Agile Manifesto (Agilemanifesto.org, 2001) the first time I felt I had an enlightenment and the first few years after, in all my work, I pushed every clients and company I worked with to embrace “working Lean”; many times failing terribly by the simple reason that it didn’t always make sense for people to change to my “better” way of doing things” when everyone was perfectly happy with the current way things was done. What I learned from this is that organizational change never should be a mean in itself and that any change process only can succeed if everyone within an organization clearly can see the benefits it will lead to.

If your organization has recognized that to stay competitive a digitization of your business processes and core customer resources is necessary, then no matter organizational size you should take time to learn more about the McKinsey system of digital transformation and the theories which it is built upon referenced in this article. This system summarizes much of today’s leading business theories and the fact that McKinsey uses it as a base for their own work, one can assume that the system has been tested, refined and verified in possibly hundreds or even thousand McKinsey projects.

However; if your organization is doing great with a reporting structure based on sharing excel files through email, if you manage your projects using simple task lists on a whiteboard, if key members of your management team not even use a computer and if co-workers, leadership and customers are perfectly content with your current status-quo then who am I, McKinsey or any best-selling author to say that you are wrong?